The company aims and objectives

1 Introduction

Strategic management is the way a business will formulate, implement and evaluate its decisions across the departments in order to help the company to achieve its objectives. It means using the company aims and objectives to develop policies and plans, allocate resources in order to implement the plans and then evaluate whether this has been successful.

Strategic Planning ensures that an organisation is doing the right things. If a business needs to change the way it runs its business operations then a strategic plan explains what the organisation is changing to. Once it has determined the right things to do, it devolves accountability for doing them right to one or more business plans (Guest 1989). Every organisation has a mission statement setting out its aims and objectives and strategy can be defined as “The determination of the basic long-term goals and objective of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals” (Alfred Chandler, 1963). Johnson and Scholes (2002 p13) suggested that a company needs a mission and mission statements; a vision or strategic intent; goals; objectives; unique resources and core competences, strategies and control. Strategy was ‘the direction and scope of an organisation over the long term: ideally which matches its resources to its changing environment, and in particular to its markets, customers or clients, so as to meet stakeholder expectations. To continue in business and be profitable every business needs a strategy and according to McGee et al (2005)strategy is the ability of a company’ to thrive and survive’. The report will outline the stages, steps and procedures that should be implemented to carryout a strategic analysis as part of the strategic management process. The New Vintage Car Company is a specialist organisation which has a small niche in the specialist car market and a mission statement, objectives and strategic intent.

1.1 Aims and Objectives of the report

The aim of the report is write a report about a chosen firm within the automotive industry (real or invented) indicating the stages, steps and processes involved in the planning and analysis, formulation and implementation and evaluation of the strategic management process.

1.2 Objectives

• To understand the importance and characteristics of strategic management to all forms of organisation
• To investigate a range of strategic management models and their strengths and weaknesses
• To consider the relevance for strategic management of organisational culture and ethics
• To analyse and evaluate a range of strategic management models
• To apply and to tailor models of strategic management as appropriate

2 Stage One – Strategic analysis

Generally there are two main approaches to strategic management – the organisational approach dealing with competitive advantage, resource allocation and economies or scale and the the human approach. According to Arieu (2007), ‘there is strategic consistency when the actions of an organization are consistent with the expectations of management, and these in turn are with the market and the context.’

Strategic management can be bottom-up, top-down, or collaborative processes which means that in the bottom up approach employees send in proposals to their managers who choose the best ideas which are assessed through capital budgeting processes such as return on investment or cost benefit whilst the top-down approach is where the CEO and the planning team make the decisions. Johnson (1999 p154) advised that strategic planning was the ‘process of drawing up long-term, wide ranging plans in accordance with the organisation’s main aims’ and will involve analysing customer expectations, competitive pressures and overall changes in the market. Operational planning on the other hand was the development of plans for a specific operation within the organisation whether it was for a product or a service. He added that although organisations used information from analysis, quantified objectives which became the organisation’s targets for a planned period of time, could be based on ‘guesswork’.

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Strategic management is an ongoing process that evaluates and controls the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment., or a new social, financial, or political environment. (Lamb, 1984:ix).

As the New Vintage Car Company is a small specialist business it is very much a very collaborative style of strategic management with the 10 main employees taking part in management decisions.

2.1 Strategic management theories

Strategic management was a concept which was developed in the 1950s and 1960s which theorised that gathering all the functions under one strategy and coordinating the different departments. Chandler (1962) showed that a long-term coordinated strategy was necessary to give a company structure, direction, and focus stating that ‘structure follows strategy’. Selznick theorised that an organisation’s internal functions should be matched to any external environmental circumstances through SWOT analysis which was developed by the Harvard Business School General Management Group. Anscoff developed a strategy grid to compare market penetration strategies, product development strategies, market development strategies, horizontal and vertical integration and diversification strategies and a gap analysis. Drucker’s (1969) management by objectives (MBO) meant that companies set objectives and then monitored if they had been achieved and suggested the use of team work. Function strategies include marketing strategies such as new product development strategies, human resource strategies, financial strategies, legal strategies, supply-chain strategies, and information technology management strategies dealing with short and medium term plans.

However, Mintzberg (1988) thought of strategy as a process or pattern of behaviour which has evolved over time and necessitated fluidity and the realization that there were unpredictable issues which could arise.

2.2 Analysis

Part of the planning process for a company would be to analyse the current market place and the company’s position in it. This could be done through various analysis techniques such as PEST, SWOT, Gap analysis, Porter’s generic strategy analysis.

2.2.1 PEST analysis

The PEST analysis could be used by the organisation to look into market growth or decline whilst investigating the position of the company, its potential for future growth and the direction the business should take. PEST stands for Political, Economic, Social and Technological factors, and can be used in conjunction with SWOT which are the Strengths, Weaknesses, Opportunities and Threats analysis. PEST can be extended to PESTLE by adding Environmental and Legal or even adding any Political and demographic issues as STEEPLED (Grundy 2006).

2.2.2 SWOT analysis

In order to see where the company is in the market place, a SWOT analysis will need to be undertaken. SWOT stands for Strengths, Weaknesses, Opportunities and Threats.

Strengths would be the type of business and whether is has been well established in the area and has a loyal customer base

Weaknesses are anything which may hinder the company in achieving its objectives and which may need to be changed such as financial constraints.

Opportunities are the things a companies can use to progress

Threats are the issues which affect a company and could potentially threaten the company’s futuresuch as thecredit crunch with suppliers closing down, transport costs rising and banks not lending money (Armstrong 1982 p198 & Hill & Westbrook 1997).

2.2.3 Gap analysis

The company will need to judge where there is a gap in the market, either a place for their product or where the company is at the moment and where they would like to be and so the difference is the gap.

After this analyis the company needs to decide how to bridge the gap either through a strategic approach or a tactical/operational approach.

The tactical operational approach would make use of the Marketing Mix – Product, Place, Price, Promotion

2.2.4 The value chain

Porter (1998) also theorized that a company could be successful if it contributed to the industry it was in via a value chain which meant that everything a company does should be questioned in terms of what value it adds in the eyes of the final customer. In 1993,John Kay stated that ‘adding value is the central purpose of business activity’.

2.3 Competitor analysis

A company needs to analyse what its competitors are doing, how well they are doing it and whether they are a real threat.

2.3.1 Competitive advantage and Porter’s 5 Forces theory

Porter’s 5 Forces Model – New entrants, Industry competitors, Suppliers, buyers and substitutes is a useful theory can help for an organisation to formulate the appropriate strategies to be successful in their market (Thurlby, 1998). Porter’s theory takes 5 elements which can influence a business such as New Entrants to the market and Industry competitors – are there any new or similar companies setting up in business which could be a threat and which customers will choose instead of the original company; Suppliers who may be powerful enough to put up prices which the company has to pay or even refusing to do business with the company; Buyers – how customers can put pressure on the company to lower prices or alter product lines; Substitutes – customers changing to alternative products from another company if there is a product price increase; the use of price cutting and aggressive marketing by other similar rival companies; (Porter 1998).

2.4 The Competitive-positioning approach

Companies need to be aware of the competitions own strategies at all times. A competitive advantage can be attained by organisations if the current strategy is value-creating, and not currently being used or activated by competitors or future competitors (Barney, 1991, p102).

Choosing the correct market level is important as too high will lose customers and too low may see to many competitors. Porter (1995) thought that there were three routes to competitive advantage. A firm either (1) focused on a particular customer group (2) Specialised in skills competitors cannot match or (3) became the lowest cost producer.

Having the competitive advantage means that a company must outperform its competitors by delivering superior value to customers and, in doing so, earn an above average financial return for the company and its stakeholders. Doing this successfully over a long period is sustainable competitive advantage which requires that they outperform their competitors for a long period in a way that customers are prepared to purchase at a sufficiently high price. Campbell et al (2007) argued that there were 8 areas which need to be considered for competitive and sustainable competitive advantage to continue for a company. They need to have a strategic intent to stretch the organisation in the future and be willing to work at continuous improvement which includes inputs, processes and outputs of products and services. They would need to work in a different way to their competitors and importantly they need to be perceived to be better by their customers who need to believe that they are the main reason for the company being in business – to serve their customers. The company must build on their core competences by continuous internal review and keep communication channels open both internally and externally. Its core competency is the restoring of classic cars and all the skills which go with this. The management must be aware that the business environment is constantly changing and they must be prepared to change with it especially during the current recession They need to be aware of their competitors but also know when collaboration and co-operation with competitors through strategic alliances is a necessity.

3 Stage Two – Strategic formulation

The New Vintage Car Company has formulated a strategy through the planning and analysis of company’s SWOT and the gap analysis as well as having looked at the competition which is a few other similar small businesses. Strategy formulation is the process of determining appropriate courses of action for achieving organizational objectives and staying a profitable business. Johnson and Scholes (2002 p11) theorised that there were different levels of strategy: (1) corporate dealing with the ‘overall purpose and scope of an organisation and how value can be added to the business areas of the company’ and when a company has decided on its products and the market it should compete in (2) business unit strategy deals with how a company can achieve an advantage over its competitors and what opportunities can be identified or created and competitive strategy which is when the company sets out the framework for success in the market it has chosen with goal setting, commitment of resources and the monitoring or strategies and (3) operational strategy is how the different areas of a company deliver the corporate strategies with reference to resources, people and processes.

Once the strategy has been formulated, the company needs a mission statement, set the aims and objectives and conduct the internal and external analyis of the niche in the market. The company would then implement the strategy by undertaking certain steps such as entering into a partnership or expanding distribution outlets. The strategy will then need to be reviewed.

The strategy formulated by a company should reflect an environmental analysis as well as the organisaitonal vision, mission statement and organisational objectives. The way to formulate strategic plans is to use three steps which find out where the company is now, determine where the company wants to go, and then determines how to get there. This may require to take certain precautionary measures or even to change the entire strategy. Johnson and Scholes’ (2002) strategic model looks at three criteria – suitability and whether it will work; feasibility and whether it is possible to make it work and acceptability and whether the strategies will be successful.

3.1 Suitability

The strategies for the company need to be suitable for that company and its current and future position in the market. The question to ask is – is it economical to pursue the strategies and would there be any cost advantages for the business due expansion (economies of scale) referring to efficiencies associated with supply-side changes, such as increasing or decreasing the scale of production, of a single product type? The company needs to also address the question of economies of scope which means efficiencies primarily associated with demand-side changes, such as increasing or decreasing the scope of marketing or distribution. A company which sells many product lines, sells the same product in many countries, or sells many product lines in many countries will benefit from reduced risk levels as a result of its economies of scope. If one of its product lines falls out of fashion or one country has an economic slowdown, the company will, most likely, be able to continue trading. Thinking of its customers the company needs to look at the experience economy and what their customers will get and how they will feel they receive not only value for money but are getting something extra and feel part of the company experience. This encourages company loyalty. The New Vintage Car Company has a loyal customer base in the UK and has overseas customers in countries where the current financial downturn has not had such as great impact. The company would make use of decision tree analysis and what if analysis.

3.2 Feasibility

Feasibility is concerned with the resources required to implement the strategy and whether they are available now or need to be developed or obtained. The resources which would need to be looked at would be (1) finance and funding and whether the company would have enough capital without taking on a loan or issuing more shares; (2) people and whether there would need to be a recruitment drive to employ more skilled craftspeople or even take on apprentices; (3) time and whether the length of time it would take would be prohibitive or whether the time scales involved would be acceptable and (4) information and whether the company has enough expertise and knowledge to expand using the strategies. For this the New Vintage Car Company would need to undertake a cash flow analysis and forecast as well as a break even analysis and a deployment analysis.

3.3 Acceptability

Acceptability deals with how the main stakeholders of a company will accept any new strategies. The stakeholders in a company are the shareholders, employees and customers. They will need to know the expected performance outcomes and whether there are risks and what the consequences of a failed strategy would be for the company. The shareholders would want to know that there would be returns on their investments either financial or non financial and the employees would expect improved pay or career prospects and customers would be concerned that they would still get the quality they were used to. An ideal tool for this would be stakeholder mapping.

Therefore the formulation of a good workable strategy for the New Vintage Car Company is essential. Strategic formulation allows the company to plan its capital budgeting especially where there are limited funds and capital funds need to be invested where they can be most effective for all the stakeholders.

The next stage is implementation. Implementing any strategies will mean a change of some kind. Strategic Planning ensures that an organisation is doing the right things and then doing them right but the strategic plan explains what the organisation is changing to. The Corporate plan would be at the head of the strategic planning with departmental strategic plans and functional strategic plans for other parts of management. What goes into a strategic plan must take into account the needs of the stakeholders, any environmental risks and threats plus the competencies, resources and values that the company has. (http://www.changeperform.com.au/strategic_plan_process.html)

4 Stage Three – Strategic implementation and evaluation

In order to implement the plans made, there will need to be an allocation of resources including money, people, time and computer support and establishing a chain of command with specific responsibilities given to individuals or groups. This also includes the right training for employees. Strategic management can often be planned or unplanned in that there are unpredictable circumstances as well as those which can be planned for. Once the strategy has been implemented, it will need to be evaluated as to its success or failure once again through SWOT analysis for company strengths, weaknesses, opportunities and threats both internal and external.

The changes that could affect an organisation are any Political Changes such as a change in government, legislation, taxation,; any Economic Changes such as inflation, interest rates, unemployment; Social Changes such as population trends Technological Changes such as breakthroughs, new products and technologies,

Implementing any strategies will need time and effort but they should not be imposed. The management of change is an important part of strategic implementation. Change cannot be forced on employees or implemented too quickly or there will be industrial problems. The idea of change is opposed for many reasons including job insecurity; fear of loss of status; pay cuts and job losses; breaks in routine; learning new skills and methods; change of work site and work colleagues. As the New Vintage Car Company is a small business it may be able to weather any of the changes which could affect the business. As the business uses a collaborative approach to management, the employees are part of the decision making process and the strategies which would affect them would be discussed collectively

The Paton-Johnson model (2007 p109) can be used, as it suggests sequential stages for the management of change through initial conversations about change; diagnosis of what needs to be changes, how and why; the development of a new vision for the organisation and its employees which is shared and a plan to implement the changes.

A useful addition to strategic strategies is Warr’s Vitamin Model (1987) which considers the well being of company staff and the changes made in the organisation as vitamins to help the health of the company. Healthy minded employees work well and increase production which benefits the company. Employees need to know they are valued and respected within an organisation and if they do not feel this way they are discontent.

5 Conclusions

There are many reasons why strategies fail and companies fail with them. Companies need to understand their market and their competition both now and in the future, know their own strengths and weaknesses and be aware of any opportunities which may come and any threats which are looming. The New Vintage Car Company will need to be confident of their employees competence in handling the new strategy and to introduce the changes gradually and with communication, cooperation and participation. Although strategic management is a complex process it can be handled efficiently although too much constraint may be limiting any future visions for the company. As a collaborative company there are just as many pitfalls as for those with top-down management style – ‘too many cooks’ as well as ‘dictatorships’. Strategic management consists of interpreting, and continuously reinterpreting, the possibilities presented by changing circumstances for achieving an organization’s objectives.

Strategic management processes are essential for an organisation’s success but they need to be paced and not rushed as this is where mistakes are made. The aim of the report was write a report about a chosen firm within the automotive industry (real or invented) indicating the stages, steps and processes involved in the planning and analysis, formulation and implementation and evaluation of the strategic management process. This was achieved through a brief investigation into the strategic levels associated with the New Vintage Car Company. The objectives of the report were o understand the importance and characteristics of strategic management to all forms of organisation and this was achieved through a review of the levels of the strategic management process and the theories and models with strengths and weaknesses.

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Appendix A

The New Vintage Car Company is a small specialist car making company which restores old classic cars but it looking to branch out into making new build cars based on the classic models of previous decades through a partnership with another small car company which produces self build car building kits for classic cars such as the MG.

The company employs a skilled team of classic car body builders, wheelers, panel beaters, wing makers, and fender manufacturers who are skilled in working aluminium, steel, stainless steel, copper, brass and magnesium alloy as well as restoring ash frames from old cars or fabricating new wooden frames.

The company has experience as vintage car coachbuilders has helped with classic car projects, from manufacturers including:

Alvis; Amilcar; Auto Union; AC; Alfa Romeo; Aston Martin; Allard; Austro Daimler; Bentley; Bugatti; Bristol; BMW; Cadillac; Cisitalia; Cooper; Daimler; Delahaye; Delage; Invicta; Jaguar; Lotus; Lancia; Lagonda; Lamborghini; Maserati; Mercedes; Morgan; Porcshe; Riley; Rolls-Royce; Railton; Sunbeam; Tojeiro; Vauxhall; Veritas.

The company has successfully completed a wide range of car commissions, from simple body repairs on existing bodywork to complete restorations and new bodies, sometimes from the most basic of plans. Commissions are from the whole of world motoring history, from fantastic exotica such as the 1938 Alfa Romeo Bimotore and two 1930’s Grand Prix Auto-Unions, to a Mercedes-Benz 300 SLR Gull-Wing Magnesium Coupé. (adapted from http://www.rodjolley.com/flash/flashed.html)